For centuries, water has been seen as a free public good, with no price attached.
But as droughts, population growth and farming demand deplete aquifers worldwide, water prices and demand for innovative water technology are set to steadily rise, said experts.
“The dry regions such as the American Southwest are getting drier,” said Simon Gottelier, an investment manager at Impax Asset Management in London.
Every place on the global map will need to spend money on water, said Gottelier. He predicts that the water industry will grow 5% to 7% each year on average.
Financial firms are meeting the demand for investable opportunities in some new ways. Texas-based Waterfund LLC, for one, is creating swaps, a derivative where one security is exchanged for another. The risk management firm has also teamed with IBM to craft a water index that finally pins a price on water use in the world’s 100 largest cities. Through these swaps, institutions can then hedge their risks when water prices rise.
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